After a false start three years ago, the federal Department of Labor (“DOL”) will finally be rolling out an increased minimum salary threshold for employees qualifying under the “white collar” exemptions. The increase in the salary threshold for professional, administrative, and executive exemptions (making up the “white collar” exemptions) under the Federal Fair Labor Standards Act (“FLSA”) will become effective on January 1, 2020.

In order to qualify for one of these exemptions, there are three elements to meet:

• The employee must be paid on a salary basis (rather than hourly);

• The employee must be paid a minimum salary; and

• The employee must perform certain duties to meet the test.

Effective January 1, 2020, the second prong – the minimum salary threshold –will increase from $23,660 ($455 per week) to $35,568 ($684 per week) for white collar workers under the FLSA.

As employers review their employees’ status as an exempt or non-exempt employee in connection with the FLSA changes, it’s also important to remember that certain states also have minimum salary thresholds for certain exempt statuses. Most of these salary thresholds are greater than the federal level, but important distinctions apply.

New York

In 2016, as the federal DOL was set to implement its first set of salary threshold increases, New York followed suit, but establishing a higher salary threshold that was set to increase annually to follow minimum wage increases for non-exempt employees. New York’s salary thresholds, like its minimum wage requirements, become effective on December 31 of each year (and not on January 1).

Unlike the federal regulations, New York’s minimum salary threshold applies only to the administrative and executive exemptions – and not the professional exemption. Employers in New York who rely upon the professional exemption need only comply with the federal salary threshold, and not the increased New York State threshold.

The minimum salary threshold for the administrative and executive exemptions will be subject to the following increases:

• Employers in New York City

  • $1,125.00 per week ($58,500 annually) on and after 12/31/19 (the state no longer distinguishes between large and small employers in NYC)

• Employers in Nassau, Suffolk, and Westchester Counties

  • $975.00 per week ($50,700 annually) on and after 12/31/19

  • $1,050.00 per week ($54,600 annually) on and after 12/31/20

  • $1,125.00 per week ($58,500 annually) on and after 12/31/21

• Employers Outside of New York City and Nassau, Suffolk, and Westchester Counties

  • $885.00 per week ($46,020 annually) on and after 12/31/19

  • $937.50 per week ($48,750 annually) on and after 12/31/20

Also differing from federal law, New York State does not recognize a “highly compensated” employee exemption. Under the new FLSA regulations, the threshold will change on January 1, 2020 from $100,000 per year to $107,432.

California

Like New York, California has both a higher minimum wage and higher salary exemption threshold than federal law. California’s Labor Code Section 515 requires that in order to qualify for a white collar exemption, employees must earn two times the state minimum wage for “full-time employment,” which is defined to mean 40 hours per week.

As California’s minimum wage increases annually, the minimum threshold for exempt employees will increase in turn, on January 1 of each year:

Small Employers (25 or fewer employees)

• $960 per week ($49,920 per year) on and after 1/1/20

• $1,040 per week ($54,080 per year) on and after 1/1/21

• $1,120 per week ($58,240 per year) on and after 1/1/22

• $1,200 per week ($62,400 per year) on and after 1/1/23

Large Employers (26 or more employees)

• $1,040 per week ($54,080 per year) on and after 1/1/20

• $1,120 per week ($58,240 per year) on and after 1/1/21

• $1,200 per week ($62,400 per year) on and after 1/1/22

California also sets a minimum hourly rate, monthly salary, and annual salary threshold for exempt computer professionals, which increases annually. Effective January 1, 2020, exempt computer professionals must earn $46.55 per hour, or $8,080.71 per month, or $96,968.33 per year.

Alaska

Similar to California, Alaska requires employees to earn two times the state minimum wage for the first 40 hours worked in order to meet the minimum salary threshold test for white collar exemptions. Effective January 1, 2020, the minimum salary threshold will increase from $791.20 per week ($41,142.40 per year) to $815.20 per week ($42,390.40 per year).

More to Come?

Pennsylvania and Washington State are both considering higher salary thresholds for exempt employees.

Pennsylvania’s proposal, affecting the three white collar exemptions, would become effective the date of the final rule making, so the date is uncertain, though expected to apply on January 1, 2020:

• $684 per week on and after 1/1/20*

• $780 per week on and after 1/1/21

• $875 per week on and after 1/1/22

Washington’s proposal would apply to the three white collar exemptions and would gradually increase over the next few years:

Small Employers (50 or fewer employees in Washington)

• $675 per week ($35,100 per year) on and after 7/1/20

• $945 per week ($49,140 per year) plus an adjustment for the Consumer Price Index (“CPI”) on and after 1/1/21

• $1,080 per week ($56,160 per year) plus an adjustment for CPI on and after 1/1/22

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/23

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/24

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/25

• $1,350.38 per week ($70,220 per year) plus an adjustment for CPI on and after 1/1/26

Large Employers (51 or more employees in Washington)

• $945 per week ($49,140 per year) on and after 7/1/20

• $1,080 per week ($56,160 per year) plus an adjustment for CPI on and after 1/1/21

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/22

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/23

• $1,215 per week ($63,180 per year) plus an adjustment for CPI on and after 1/1/24

• $1,350.38 per week ($70,220 per year) plus an adjustment for CPI on and after 1/1/25

• $1,350.38 per week ($70,220 per year) plus an adjustment for CPI on and after 1/1/26

Additionally, Washington State is proposing a minimum hourly rate for exempt computer professionals:

Small Employers (50 or fewer employees in Washington)

• $27.63 per hour on and after 7/1/20

• $37.13 plus an adjustment for the Consumer Price Index (“CPI”) on and after 1/1/21

• $47.25 plus an adjustment for CPI on and after 1/1/22

Large Employers (51 or more employees in Washington)

• $37.13 per hour on and after 7/1/20

• $47.25 plus an adjustment for CPI on and after 1/1/21

• $47.25 plus an adjustment for CPI on and after 1/1/22

 Conclusion

As employers prepare for 2020, it’s important to remember that in reviewing an employee’s exemption status, the new FLSA regulations are not the only consideration – state salary thresholds may be significantly higher, and increasing over the next several years.